How OPEC and Saudi Arabia could shape Biden’s political fate

OPEC and its allies could play a major role in the outcome of the U.S. presidential election this November, as observers watch closely for signs that the world’s two largest oil exporting nations, Saudi Arabia and Russia, will raise prices by cutting production.

Keeping in place voluntary cuts of 2.2 million barrels per day on top of the cartel’s total combined production cuts of 5.86 million bpd could push up gas prices in the U.S., which are closely tied to presidential approval ratings and have been a thorn in the side of President Joe Biden during his first term.

But unlike his early years in the White House, Biden now has far fewer resources at his disposal to help alleviate gas prices — including a depleted U.S. emergency oil stockpile and a more emboldened OPEC+, which has showed it is willing to buck U.S. requests in favor of their own bottom lines.

OPEC+ “is going to do what they believe is in their best interests,” Gerald Feierstein, a senior fellow at the Middle East Institute and former U.S. ambassador to Yemen, told the Washington Examiner in an interview. 

“And they’re going to pursue that regardless of who’s in the White House and what U.S. preferences might be,” he added.

Gas prices and political vulnerability

Gas prices and presidential approval ratings are closely linked and have been a major feature during Biden’s first term — including in the months ahead of the 2022 midterm elections.

A combination of post-COVID industrial activity and Russia’s invasion of Ukraine sent Brent crude futures north of $130 per barrel in early 2022, causing U.S. gas prices to a record-high national average of $5.02 per gallon to mark the start of summer driving season. Biden’s approval ratings took a direct hit, bottoming out at just 38% in the weeks that followed.

The administration’s scramble to take action to lower gas prices, including a 180-million-barrel sale of emergency oil from the U.S. Strategic Petroleum Reserve, helped cushion initial oil market shocks and reduce U.S. gas prices ahead of the November midterm elections.

So far in 2024, oil markets have been tighter than expected as a result of extended OPEC+ supply cuts, which many now predict will last beyond the group’s next meeting in Vienna in June, higher demand forecasted for the second half of 2024, and conflicts in the Middle East that threaten to escalate and shut in some supplies.

More recently, drone attacks aimed at Russian oil refineries took supplies offline and further cut into the country’s oil output.

These factors have prompted many analysts to revise their oil price projections upward for the second half of the year, including Morgan Stanley, which now expects Brent crude to average around $94 per barrel by the third quarter of 2024 — a $10 increase from earlier estimates.

Others, including analysts at the energy research firm FGE, said they expect oil prices in the range of $90-$95 per barrel by the third quarter of 2024.

“Demand is going to creep higher, seasonally, in the second half of the year, and it’s going to outstrip supply growth from non-OPEC+ sources,” James Davis, who heads up crude production forecasting at FGE, told the Washington Examiner in an interview. “So the balance is going to get tighter. That’s the expectation.”

U.S. gas prices currently stand at just $3.66 per gallon, according to AAA, well below where they were at the same point in 2022. But spring prices are not necessarily a reliable indicator for gas costs later in the year. Prices typically rise around Memorial Day, kicking off the start of the summer driving season, and are subject to natural disasters like hurricanes that risk taking current facilities offline.

Gas prices are of great importance to Biden. But they are largely inconsequential for OPEC members, whose primary goal is keeping oil prices high enough to balance their budgets, but not high enough to drive away customers or push them to turn to renewable energy sources instead.

While OPEC+ production is significantly below yearly averages, according to data from the Energy Information Administration, customers seem willing to buy the oil at the higher price points — so there’s not really an incentive for OPEC+ to change its behavior, at least for now.

“The production cuts have been successful [for OPEC], so I really don’t see why OPEC would choose to reverse course anytime soon,” GasBuddy’s chief petroleum analyst, Patrick De Haan, told the Washington Examiner in an interview.

OPEC relationships

OPEC+ decisions are not above political influence. This was on display most prominently in 2022, when Saudi Arabia led OPEC+ in ordering the October production cuts of 2 million barrels per day — defying a request Biden had made during his politically charged trip to the kingdom months earlier.

The Saudi spurn sparked scathing criticism from White House officials and many Democrats in Congress, who vowed retaliation and a reassessment of the U.S.-Saudi relationship, though to date they do not appear to have acted on that warning.

If nothing else, the 2022 cuts underscored a more bullish Saudi Arabia that is willing to prioritize its own bottom line above all, Feierstein, the former U.S. ambassador to Yemen, told the Washington Examiner.

“They don’t love Biden. I think that they remember Biden’s comments from the 2020 campaign, which were pretty harsh about Saudi Arabia. They probably wouldn’t mind seeing Donald Trump back in office,” Feierstein added, though he described any political components as secondary to Saudi Arabia’s self-interests.

“Beyond that, do they feel compelled to do favors for the Biden administration? Probably not,” Feierstein said.

In the near term, going to OPEC for more production makes no sense from a supply perspective — and fears of supply shortages are not enough of an incentive for the cartel of oil-producing nations to revisit their current output levels.

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Short of a major supply disruption, it’s unlikely Biden would request OPEC+ to produce more oil. But should he do so, Davis said, the request would be largely futile, since the customers for that oil do not yet exist.

Consider, for example, Biden asking OPEC+ to sell more oil, “and OPEC+ asking Biden in return who they might sell it to,” Davis gamed out. “Biden would then have no sensible answer other than, ‘Me, to my SPR’ — and there’s no incentive for them to do that.”